Open Range Sues RUS, FCC Over Loan Commitment
Open Range sued the Rural Utilities Service and FCC concerning an RUS-approved loan of $180 million for the company to build a wireless broadband network. Open Range filed a complaint Thursday in the U.S. Bankruptcy Court in the District of Delaware as part of its Chapter 7 proceeding (bit.ly/PuueHY). Open Range is seeking the remainder of the funds RUS agreed to pay, which is about $20 million, and other damages, it said.
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Open Range sued the agencies on 12 counts, including contract breach, tortious interference, and aiding and abetting breach of fiduciary duty. Open Range said RUS breached its contract by failing to give it the entire loan amount. Open Range received $78.4 million under the loan. “In addition to RUS’s failure to disburse loan funds for expenditures already approved for advance, the RUS also improperly refused to approve for advance certain expenditures that were eligible to be approved,” it said. The breach of contract “caused and/or substantially contributed to Open Range’s insolvency and eventual bankruptcy filing,” the complaint said.
The FCC’s dismissal of Globalstar’s ancillary terrestrial component gating criteria in 2010 contributed to Open Range’s problems, the complaint said. Through no fault of Open Range, “the United States, through the FCC, prevented Open Range from fulfilling its business plan,” it said. The FCC granted the company special temporary authority to use the Globalstar spectrum until it could find other spectrum to use. Open Range could use the spectrum in 264 markets, but began the build-out of its network of about 540 markets, the complaint said. This reduction “was necessitated by the adverse action that defendants had taken against Open Range. Thus, defendants interfered with Open Range’s ability to meet its original business plan and service its debt to the U.S."
The commission’s conduct went beyond that of a regulator, Open Range said. Between November 2010 and January 2011, the commission “gave unusually fast approval to LightSquared’s application to waive ATC requirements to enable a spectrum licensing agreement with Open Range, while having previously denied Globalstar’s more limited waiver request,” it said.
Open Range also claimed that the agencies engaged in equitable subordination. They failed to “take steps to ensure that Open Range did not incur further debt and expense it could not reasonably expect to pay under the circumstances” and they obtained “an unfair advantage over the debtor’s other unsecured creditors and caused injury to those creditors,” it added.
Open Range asked the court to change its Chapter 11 case to a Chapter 7 bankruptcy case this year, according to court documents. RUS and the FCC had no comment.